BMB Investment Bank announces 2004 results and plans for a capital restructuring

The Bank has also announced its detailed plans for a capital re-organization and rights offering.

The difficulties of the last few years, most notably the cancellation of interbank and trading lines, forced the Bank into the selling of assets during 2002 and 2003 at distressed prices in order for the Bank to meet its liquidity needs. This and various other factors resulted in a capital erosion and has placed the Bank in a position where a capital re-organization is essential to its survival. The Bank is therefore aiming to raise US $75 million in share capital, which, if successful, will result in its capital adequacy ratio being increased to almost 23%.

An extra-ordinary general meeting of its shareholders is being called for May 3 to approve its proposed restructuring and rights issue. The proposal involves a reduction in the Bank's paid up capital in order to cover accumulated losses followed by an offering of new shares in the amount of US $50 million and a new feature of debt for equity conversion for another US $25 million. The total of US $75 million, coupled with a US $20 million medium term secured liquidity facility obtained in 2003, provide a solid base upon which the Bank can rebuild its business. As testament to the shareholders' confidence in the Bank's future, BMB has already received an undertaking from an existing shareholder to take up US $33 million worth of new shares should the US $50 million not be fully subscribed.

On the financial results side the Banks is pleased to announce a consolidated net profit of US $0.6 million for 2004 as compared to a loss of US $12.8 million in 2003. Earnings from private equity funds played a key role in this turnaround and will continue to do so over the coming years as macroeconomic trends in Europe and North America continue to improve. In fact, income from investments showed a dramatic increase from US $1 million in 2003 to US $7.9 million in 2004. Excluding T&T Beverages Ltd., an investment which the Bank holds for sale, BMB's core banking business made a profit of US $4 million in 2004.

Going forward, the Bank plans to maintain its focus on private equity fund investments and its client business, which have clearly served the Bank well. The Bank also plans to review entering new, less market sensitive areas to reduce volatility in earnings.

In commenting on the results, Shaikh Ali Jarrah Al-Sabah, Chairman, said:
'The past several years have been difficult ones for BMB. It is no exaggeration to say that our business franchise and our staff have been severely tested. While challenging times still lay ahead, we believe we have passed the test as we continue to operate our business and meet our obligations. The fact that we have survived the difficulties of recent years demonstrates the fundamental soundness of our assets and the dedication and competence of our staff. We are determined to move forward and regain our former position among the premier investment banks in the region; and we are confident in our ability to do so. '

Albert I. Kittaneh, Chief Executive, said:
'The Bank has been forced to operate under the most difficult of conditions over the past few years; conducting our business without interbank and trading lines and being forced as a result to sell assets to meet our liquidity needs. In addition, the very lengthy negotiations for the refinancing of our US $75 million medium term facility added to the uncertainty surrounding the institution. The Bank has come through, however, and with the support and understanding of our shareholders, we hope to start rebuilding our business and put the Bank firmly on the path to recovery. On behalf of the Bank, I would also like to take this opportunity to express our sincere gratitude to the Bahrain Monetary Agency for its wise counsel and its constant support during these difficult times.'

Bahrain Middle East Bank (E.C.) was established as an Offshore Banking Unit in 1982. Although currently not trading, its shares are listed on the Bahrain Stock Exchange under (BMEB.BH). The Bank's shares are held by over 13,000 shareholders throughout the Gulf.